1. Why Lean Six Sigma?

I guess before we talk of the why of Lean Six Sigma, we should briefly address the what.

Lean operations consist as much as possible of only value added activities: Lean aims to eliminate all waste in the work place. The outcome is that your operations become high-speed and low-cost.

Six-sigma focuses on achieving consistent product and service quality by eliminating sources of variation.

Lean Six-sigma is the fusion of these approaches to achieve high speed, low cost and defect free operations, with products and services that delight the customer and guarantee profitability for the business. It is necessary because each by itself is deficient. For instance Lean does not recognise the impact of variation nor does it explicitly seek customer input. Six-sigma incorporates customer viewpoints via the Voice of the Customer tools but fails to specifically identify waste.

2. Lean Concepts: Pull, WIP and Value-Added

The basis of the lean approach is that we produce only what is required just when it is needed (leading to the term Just-In-Time).Lean accelerates the velocity of a process by reducing all forms of waste.

Pull:

The idea is that the work done in a process should be driven entirely by customer demand. Each step in the process commences only when there is a signal from downstream indicating that an item has exited the process. Implementing a pull system eliminates overproduction and reduces the need for inventory.

WIP:

Work in process represents the number of things waiting to be worked on. The speed of the process is inversely proportional to the amount of work in process.

Lead time = Work in process/Completion rate

Given a desired lead time and a known completion rate (obtained from observation), the allowable work in process can be calculated.

Value Added:

This concept has been discussed in our previous articles. Only work which adds features for which the external customer is ready to pay is value added. A second category of work necessary to satisfy an internal customer or regulatory requirements is known as organisational value added. All others (rework, multiple approvals, unnecessary movement etc) are non-value added.

A measure of the degree of value addition is process cycle efficiency.

PCE = Value added time/Total lead time

In many instances, PCE especially in service situations is below 10% and represents huge opportunities for improvement.

3. Six Sigma Concepts: Variation and Process Capability

Six-sigma eliminates variation by removing the special and common causes, thus improving the capability of the process.

A fundamental expression of the relationship between a process output Y and the process variables Xi is:

Y = f(X1 X2 X3 X4 Xn)

In attempting to improve the process, we seek to identify those process variables with the highest impact on process performance and work to optimise those. The six-sigma methodology follows a specific sequence with the acronym DMAIC (define, measure, analyse, improve and control) and tools exist for carrying out each step of the sequence.

Variation:

An important tenet of statistical process control is that every measurable phenomenon is a statistical distribution. This means that the output of a process will generally vary around its typical values.

Two types of variation exist. Variation from special causes or assignable variations are caused by conditions that can be identified and where necessary, eliminated. Common cause variations are random and cannot be traced to a specific cause. A process which only has common cause variations is said to be under control.

The standard deviation of the parameter of interest, sigma (symbol ?), is a measure of this variation.

Process capability:

This parameter measures the degree to which a business process, with its current level of variation, is able to satisfy the requirements of the customer. It is defined as the smaller difference between the upper or lower customer-tolerable limit (CL or CU) and the process average (X), divided by the process standard deviation.

Cpk = min[|X-CL|,|CU-X|]/?

Acceptable values for this ratio are in the range 3 and over. A low value indicates that the process is incapable of meeting customer requirements at a Six-sigma level. The process outputs will contain defects in excess of 3.4 per million opportunities.

4. Implementing Lean Six Sigma

Many organisations have transformed themselves significantly through the implementation of Lean Six-sigma. Yet others have faltered in their attempts at deployment. This is because it is as much about people and organisational culture, as it is about specific tools and techniques. To emphasise tools and techniques to the exclusion of cultural factors is to guarantee failure.

Preparation:

Michael George advises the following sequence to prepare for a successful Lean Six-sigma implementation.

• Select a Lean Six-sigma champion with leadership and communication skills

• Establish a baseline snapshot of the organisation with respect to the business status, existing knowledge and attitudes towards the Lean Six-sigma initiative

• Interview top management to identify critical elements of success for the business and for Lean Six-sigma

• Engage key influencers (formal and informal) through focus groups and interviews, to apply tipping point effects in rallying support

• Assess the impact of what you learn

Deployment:

In summary, deployment should be carried out as follows using the DMAIC model:

• Stretch the process by applying lean techniques
• Solve the problem of deviation from standards
• Ensure maintenance of the improved processes using six-sigma

Define: Agree on the problem and stakeholders, ascertain linkage to corporate strategy and impact on ROIC, agree process boundaries and metrics

Measure: Establish process baselines, observe the process and collect data

Analyse: Apply tools like value stream mapping, time trap analysis, failure modes and effects analysis, ANOVA etc

Improve: Use lean tools like 5S, TPM, Kanban, Kaizen, Poka yoke, flow improvement, and six sigma tools like hypothesis testing etc to improve the process

Control: Implement visual management, control charts, process control plans and the Plan-Do-Check-Act cycle

Our next article considers the application of Lean Six Sigma to services and transactions.